Monthly deficit hits $220 billion, highest in U.S. history

posted at 7:23 pm on March 10, 2010 by Allahpundit

The government racked up a record-high monthly budget deficit of $220.9 billion in February, the Treasury Department announced today.

The latest flood of red ink brings the total deficit for the first five months of the current fiscal year to $651 billion, far exceeding the $589 billion shortfall for the same timeframe in the last fiscal year.

The government ended the 2009 fiscal year with a record $1.4 trillion shortfall. The Obama administration has forecast a $1.56 trillion deficit for this year.

What’s left to say at this point? All I can do is try to contextualize this for you: According to CBO, based on an analysis of the deeply deceitful numbers presented to it by Reid and Obama, the national panacea of health-care reform will save us $132 billion over the next 10 years. Which means the feds blew through our big decade-long ObamaCare refund in about … 17 days last month. (Savings from 2020 to 2029 are estimated to be $1 trillion, but follow the “deeply deceitful” link for insight into that. Even CBO scoffs at trying to predict any numbers that far out.)

Would it make you feel better to read about a Republican yelling at Geithner? Okay, let’s do it!

“It just defies common sense for this administration to pretend that you’re paying any attention at all to deficit reduction,” Rep. John Culberson, R-TX, told Geithner. “It doesn’t square with reality.”…

“If you care about fiscal responsibility, there is no way you could have argued that the response from the government should have been to stand back and let this economy collapse – that would have been far more costly,” Geithner said…

“You’ve spent more money in less time than any administration in history, you have driven the deficits to unprecedented levels, and you’re trying to sell a bill of goods to the country claiming that you’re going to create the mother of all entitlements, insure 30 million more Americans, and we’re going to save you money,” he continued. “Nobody believes that.”

Not true. Supposedly 10 percent of the public believes it, but give them another year or two of reading stories like this. That number will come down to one or two percent before too long.

Normally I like to set up a clip with a brief intro, but not this one. It speaks for itself. Click the image to watch.

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Blowback

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What’s the interest on that $220 billion, AP? How soon before we can’t pay the interest?

Knucklehead on March 10, 2010 at 7:34 PM

Funny you should ask that, because that is the highlight of the front page February Monthly Treasury Statement. The gross interest amount paid out in February was $16.893 billion, which the Treasury Department notes is 5% of total outlays.

In other terms of percentage, the interest amount is 15.7% of total taxes taken in this month.

Yes. Social engineering by the leftists is largely responsible for the credit crisis – the idea that the government can force misvaluations of debt and have that quarantined in one small section is moronic, at best, though par for the course for the retards on the left.

First, you don’t seem to have any real understanding of what caused the financial crisis. It was poorly regulated financial institutions that issued massive amounts of derivatives-based financial products (such as CBO’s) that led to the near collapse of the US financial system. Warren Buffet, who described derivatives as weapons of financial mass destruction, predicted the crisis and the vast majority of people on the left and right universally ignored his warnings. As to the TARP-based remedy of buying distressed assets without a firm valuation, that policy was driven by the Fed and Treasury, basically the same team that was running the economy under Bush and Clinton before him. If anything, it was libertarians like Greenspan that let the system fail with their adamant belief that the system should be left to regulate itself. (Greenspan has since the crisis admitted his mistake and now supports regulation.)

Insane spending by The Precedent is solely responsible for this absolutely INSANE deficit. The TARP was a one-shot deal, most of which has since been paid back. There was nothing but a $200 billion hit from Bush on that. The trillion+ deficits are all the dems and their Indonesian Imbecile’s

Again, simply not true. Obama’s spending is not the main driver of the deficit. The deficit has mushroomed because tax inflows fell sharply in the wake of the Great Recession. Even more troubling for our future- the economy under Bush had deficits that were artificially low because of the housing bubble. Take away bubble tax income driven by real estate, and deficits under Bush would have been much higher. Now consider the fact that real estate won’t return to it’s former rate of growth anytime soon.

As for the stimulus package, just about every mainstream and Wall Street economist supported the policy. As Barron’s has pointed out, if the government doesn’t at least partially fill the void left by consumers who’ve cut back spending, things would only be worse. Japan’s recent recession- marked by sinking asset prices as in the US- is a major case in point. When the government cut back stimulus spending to try and balance the budget, the deficit actually grew larger, not smaller.

This doesn’t mean that deficits are good. I was one of the few on HotAir to question the $4 trillion added to the national debt under Bush, when many people were claiming that “deficits don’t matter”. Of course they matter. The problem is that you need to raise taxes and reduce the national debt when the economy is soaring (encouraging a bubble is never a good idea) and then increase deficit spending when the economy tanks. If we cut spending in the middle of a massive recession, we’re not only going to put this country through unnecessary and prolonged pain, there’s a good chance that the deficit will only grow larger.

That’s a lot of crap you wrote, there. You don’t really understand what you’re talking about but you think that if Buffet says something it must be true (even though Buffet was famous for identifying good management and yet, he supported the most retarded person to ever occupy the White House and the most inept manager this nation has ever had to deal with in that position). The derivatives were not the problem, but you’d have to understand what illusory wealth was being stored in those derivatives in order to get a clue as to what was going on. The credit crisis was caused by the forced misvaluation of debt by the federal government, then charging Fannie and Freddie to accelerate the issuance of the mispriced debt, with the implicit government guarantee (made explicit upon actual failure) taking up the slack and introducing this virus of misvaluation into the debt markets, which then propagated throughout. It was this mispricing that collapsed. The derivatives were just the only vehicles available to store the illusory wealth (i.e. the difference between the mispriced debt and their real value) and the governmetn forced that market to mushroom as it pushed this bad debt forward. But, you wouldn’t understand any of this. Stick to parroting Buffet and admiring what a great manager The Indoneswian Imbecile is.

As to the rest of your drivel, receipts are down because every single policy and idea coming out of Washington is decidedly anti-growth. This was warned about by many (myself included) from way back during the campaign, when it was clear that a vote for the Indonesian Imbecile was a vote for national suicide.

The rest of your ramblings are hardly worth addressing, as you couldn’t even get these basic parts straight.

What’s with all these people who are like, “Yeah, I think the economy is going to turn around…always does, blah, blah, blah…”

With this kind of spending and outrageous deficits…HOW?

Does $ not count somehow if it’s blown by the government? It just simply disappears without any repercussions, with no type of tax increases to further cripple Americans? No effect on the value of the dollar?

Explain to me how this is supposed to work. Perhaps because we’ve gotten away with this kind of BS for so long, it may be a just expectation to continue to get away with it?

What debt was misvalued? Are you referring to sub-prime mortgage products?

Gee. How would anyone know from what I wrote? Hmmmm. I guess my post said that it was the mispriced debt that Fannie and Freddie were charged by the federal government with buying more and more of, cleaning the loans off the books of the lenders and freeing them to go make more and more bad loans (which is “mispriced debt”, since you seem unable to figure much out on your own).

Gee. How would anyone know from what I wrote? Hmmmm. I guess my post said that it was the mispriced debt that Fannie and Freddie were charged by the federal government with buying more and more of, cleaning the loans off the books of the lenders and freeing them to go make more and more bad loans

Aren’t you capable of explaining a point without sounding like a patronizing snot?

I asked for clarification for 2 reasons. First, you didn’t explicitly define what kind of debt had been ‘mispriced.’ Second, your version of reality doesn’t concur with the same people on Wall Street who devised the structured equity products and derivatives that pumped bad loans throughout the world financial system. In reality, the private sector had a pricing mechanism that dictated the value of debt on the secondary market. The principal cause of overvalued debt was private capital markets, which believed that the practice of mixing low quality loans with high quality loans essentially diluted risk and yielded a low risk financial products. The private ratings agencies played a disturbing role in this situation by rubber stamping mortgage-based securities as high quality and low risk. Compounding the risks, financial institutions sought protection and leverage through credit default swaps (which I won’t explain here).

Your suggestion that Freddie and Fannie, through the government, pushed Wall Street into buying mortgages on the secondary market at a specific price is simply untrue. The pricing of those mortgages was based on supply and demand in the private markets. I respectfully have to say that a lot of your anger is misplaced because your version of events doesn’t match with reality.

If you want to learn more about the cause of the financial crisis, you may want to read Too Big To Fail or another book that’s been written by a business journalist and that relies upon both private and public accounts of events.

Aren’t you capable of explaining a point without sounding like a patronizing snot?

Sorry.

The principal cause of overvalued debt was private capital markets, which believed that the practice of mixing low quality loans with high quality loans essentially diluted risk and yielded a low risk financial products.

There was nothing wrong with the tranches and their ratings, relative to the ratings of the component debt. It is easily possible to combine B rated bonds, for example, and get a AAA rated product. I know it was popular, for some odd reason, to make fun of these structures, there was nothing wrong with them. You get the same result with par golf games of scramble with teams of 20 handicap players. You’re picking the best at each moment out of a number of trials. The key is that, along with that AAA product, there must also exist products rated less than original average B. No, the mispricing was done at the point of origination (the CRA and forced sub-primes, which later spilled into the higher quality debt, due to arbitrage) and then grabbed and propagated through the system by Fannie and Freddie. Of course, the market mechanisms that were needed to keep this whole stream of transactions going had a life of its own, but that development was perverted by the contrived forces that created and drove them.

The private ratings agencies played a disturbing role in this situation by rubber stamping mortgage-based securities as high quality and low risk. Compounding the risks, financial institutions sought protection and leverage through credit default swaps (which I won’t explain here).

I think the rating agencies performed as they have traditionally performed, late and wrong. I can’t even think of a time when the rating agencies forecast any sudden dislocation correctly. People who trust rating agencies are like the idiots who trust advice from brokerage houses. I was trading at a time when there was not a single sell issued by any major brokerage house!

Your suggestion that Freddie and Fannie, through the government, pushed Wall Street into buying mortgages on the secondary market at a specific price is simply untrue. The pricing of those mortgages was based on supply and demand in the private markets. I respectfully have to say that a lot of your anger is misplaced because your version of events doesn’t match with reality.

Wrong. The illusory wealth, to take care of the mispricing for the private markets, was in the implicit guarantee of Fannie and Freddie – the ones we’ve already paid hundreds of billions covering. And the private market was very one-sided – which is what made everything so dangerous. When much of a private market is one-sided, that is a clear indication that something … “unnatural” is at work.

If you want to learn more about the cause of the financial crisis, you may want to read Too Big To Fail or another book that’s been written by a business journalist and that relies upon both private and public accounts of events.